Survey Finds CFOs Skeptical of Their Own Firms' ROI Claims

ANA Confronts Lack of Confidence at Marketing Accountability Conference

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DANA POINT, Calif. (AdAge.com) -- Financial executives don't think there's much truth in advertising.

According to a new study, six in 10 financial executives believe their companies' marketing departments have an inadequate understanding of financial controls, and seven in 10 said their companies don't use marketing inputs and forecasts in financial guidance to Wall Street or in public disclosures.

Basic budgeting
Moreover, nine of 10 finance executives said they don't use return-on-investment metrics to set marketing budgets in the annual budgeting cycle. (Two-thirds instead take a predetermined percentage of revenue or simply adjust last year's budget.)

"They don't believe the numbers," said Jeffrey Marshall, the retired editor in chief of Financial Executive magazine, who worked on the study. The research was carried out by Aegis Group's Marketing Management Analytics (MMA); Financial Executive, published by Financial Executives International, a trade association; and Ed See, former president of MMA and principal of Ed See Associates.

The better, news, perhaps, was the venue where the study was being discussed: The Association of National Advertisers' 2008 Marketing Accountability Conference. The fact that the ANA put the study on the agenda at this week's conference is a positive sign that marketers are trying to learn how to work in partnership with finance.

CFOs, CMOs quizzed separately
The research used an online survey of 130 financial executives across a range of industries. More than 80% of respondents were chief financial officers; the study was done as a parallel to an annual ANA/MMA survey of marketing executives.

On the whole, the findings showed that CFOs appear comfortable with how their companies tally up marketing spending: 80% of respondents said their firms have an adequate audit trail for tracking what was spent. And more than four of five firms in the survey had some sort of marketing ROI metrics in place.

The problem is that CFOs don't seem to buy the CMOs' claims for return on investment from marketing spending. Fewer than four in 10 financial executives surveyed said marketing forecasts made inside their companies are audit-ready, meaning the forecasts could stand the scrutiny of a standard corporate audit.

Marketers are clamoring for systems to measure ROI and better allocate spending. That was apparent at the conference, where consultants, software suppliers and research firms pitched solutions to make marketing more accountable.

Suspicious minds
The finance study suggests there's a long way to go to win over CFOs, who Mr. Marshall said significantly outrank CMOs in influence at most companies. "Finance is suspicious of marketing numbers," he said.

What do marketing executives say? The good news: Among 128 senior marketing executives participating in the 2008 ANA/MMA Marketing Accountability Survey, 33% reported "full cooperation and an open dialogue" with finance in setting metrics and methodologies for marketing ROI, up from 22% in 2007. Nearly half of respondents reported "some cooperation."

The bad news: Even marketing executives acknowledge their ability to measure marketing effectiveness is subpar. Only one in 10 marketer respondents said they could forecast the effect of a 10% cut in spending. Just 14% of marketing executives said senior management in their companies had confidence in their firms' marketing forecasts.

"The thing that scared me most," said Mr. See, "is that marketers don't believe their numbers either."

Yet he argues there's reason for hope. The finance group doesn't want to run marketing but just wants the marketing function to be accountable, he said. "Finance is willing to listen to your metrics if they're measured in dollars," he said.

Building bridges
To win over the number crunchers, make them part of the conversation in helping define issues, Mr. Marshall said. Mr. See advised: "It's really 'own your future.' Partner heavily and rapidly with finance."

Not convinced? Think of the upside: Maybe the finance department can help develop systems and controls that will make marketing more effective -- and give both the CFO and CMO confidence in the numbers.
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